Everyone’s talking about the Union Budget 2025 and the big changes that came along—most notably, zero income tax for earnings up to ₹12 lakh. But there are a few more changes that directly affect how much money stays in your hands.
The government has revised TDS and TCS thresholds on various transactions to ensure less taxes are deducted upfront and compliance becomes easier.
Let’s have a quick look at the key updates:
1. Changes in TDS thresholds
a) Interest income for senior citizens
- The TDS exemption limit on interest income for senior citizens has been doubled from ₹50,000 to ₹1 lakh.
- This means no TDS will be deducted if the interest incomes doesn’t exceed ₹1L per year.
- The same limit for taxpayers below the age of 60 was ₹40,000, which has now been increased to ₹50,000.
b) Dividend income
- The TDS threshold for dividend income has been increased from ₹5,000 to ₹10,000, providing relief to small investors.
c) Freelance income/professional fees
- Earlier the limit of professional fees for TDS compliance was ₹30,000 which has now been increased to ₹50,000.
2. Increased TCS Limit under Liberalized Remittance Scheme (LRS)
- The TCS threshold for foreign remittances under LRS has been raised from ₹7 lakh to ₹10 lakh. This allows individuals to send up to ₹10 lakh abroad without incurring additional TCS.
- For remittances exceeding ₹10 lakh, a 20% TCS will be applicable, which will be collected by the bank at the time of transfer.
- There will be no TCS on foreign remittances made for education purposes if the amount is funded by a loan. Previously such transactions were subject to a 0.5% TCS.
3. Removal of higher TDS/TCS rates for non-filers
- This budget eliminated the higher TDS and TCS rates previously applied to individuals who did not file income tax returns for the previous financial year. This has been done to simplify the tax system and encourage voluntary compliance.
- For example, a higher rate of TDS will be applicable in FY 2025-26 if the person didn’t file their ITR for FY 2024-25.
4. No penalty on late payment of TDS/TCS
If an entity fails to pay TDS to the government in time, there used to be a late payment penalty. However, this penalty was removed in July 2024 given that the entity makes the payment and files their TDS return before due date. The same relaxation has been extended for TCS as well in union budget 2025.
Here’s a table that summarises all the TDS & TCS changes.
We also made a detailed video covering all the budget amendments.
